Portland attorney faces suit in GNP dispute

BANGOR – In more fallout from the 2003 bankruptcy of Great Northern Paper, a Millinocket federal credit union is suing a Portland lawyer over money it claims it was owed but instead was diverted illegally to the bankrupt company’s former owner in Canada.

According to a complaint filed by Katahdin Federal Credit Union in Penobscot County Superior Court, lawyer Nicholas Walsh has represented Lambert Bedard and Inexcon Maine, the former owners of Great Northern, since the company went bankrupt two years ago.

Katahdin Federal accuses Walsh of having acted fraudulently by helping to direct a $160,000 payment from Katahdin Paper Co. LLC to Bedard, owner of Inexcon and a resident of Trois Rivieres, Quebec. The money, which was paid in January as a settlement over $300,000 that Katahdin Paper owed Inexcon, should have been paid to the credit union because of a $3.5 million court-ordered lien the credit union holds on Inexcon’s Maine assets, according to the court complaint.

Walsh allegedly helped divert the $160,000 payment to Bedard by failing to inform Katahdin Paper about the lien – conduct that was “willful and malicious,” the complaint indicated.

The credit union is suing Walsh for the same amount it claims Bedard received illegally from Katahdin Paper, according to the credit union’s attorney, Daniel Cummings of Portland. If the credit union can demonstrate that Walsh’s conduct amounts to a fraudulent transfer, Cummings said last week, under Maine law Walsh could be ordered to pay double the $160,000 that Katahdin Paper paid to Bedard. With added interests and costs, Walsh theoretically could end up having to pay the credit union more than $320,000, he said.

Katahdin Paper and Katahdin Federal Credit Union are separate companies that have no affiliations with each other, according to Cummings. Toronto-based Brascan Corp. bought Great Northern Paper out of bankruptcy in April 2003 for $103 million and formed Katahdin Paper to operate Great Northern’s former mills.

Walsh’s attorney, Wendell Large of Portland, said Monday he has recently read the complaint against Walsh.

“This seems to be a misunderstanding between the credit union and Mr. Walsh,” Large said. “This is a situation where there’s obviously a disagreement between the credit union and Mr. Walsh’s client.”

Large said he hopes to discuss the situation with Cummings and to clarify what has happened in the disagreement between Katahdin Federal and Bedard.

The credit union’s legal action against Walsh is the latest of several lawsuits that have sprung up in the wake of Great Northern’s 2003 bankruptcy and the subsequent closure of its mills in Millinocket and East Millinocket, which resulted in more than 1,000 mill workers losing their jobs.

According to Cummings, the lien on Inexcon’s assets was the outcome of a March 2003 ruling in favor of Katahdin Federal Credit Union in Penobscot County Superior Court. The writ ordering the lien was filed April 5, 2004, at the Maine Secretary of State’s Office and a notice of the lien was sent to Walsh a few days later, months before the $160,000 was sent to Bedard, Cummings said.

The lien was ordered after Bedard and Inexcon failed to repay $3.2 million in loans they received from the credit union in 2001. After Great Northern declared bankruptcy in early 2003, the credit union successfully sued Bedard and Inexcon in Penobscot County Superior Court for repayment of the loan.

In March, Katahdin Federal settled with Boeing Capital Corp., one of Great Northern’s major creditors, over the credit union’s claims on the assets of the bankrupt company’s estate. Katahdin Federal and Boeing, which is based in Long Beach, Calif., agreed that Katahdin Federal would receive $500,000 cash, an airplane hangar and a golf course formerly owned by Great Northern, and proceeds from the cutting of timberlands formerly owned by the bankrupt company.

Apart from that settlement, however, Katahdin Federal still can pursue Bedard and Inexcon for the remaining amount of the $3.2 million loan, according to Cummings. Because of the lien, he said, Katahdin Federal is first in line for whatever assets in Maine that Bedard and Inexcon may have, including the $300,000 promissory note and subsequent $160,000 payment to Bedard.

“We assert those proceeds were the property of the credit union,” Cummings said.

Besides the promissory note, the only asset Inexcon has in Maine is an airplane hangar at Millinocket airport, Cummings said Thursday. He said this hangar is a different hangar from the one Katahdin Federal received in its settlement with Boeing Capital.

“That’s all [the assets] we’re aware of at this time,” he said.

Cummings said that at one point, the $3.2 million Katahdin Federal loaned Bedard and Inexcon roughly represented one-third of the credit union’s total capital. He said he does not know how much capital the credit union has now.

“I can’t tell you where it is today,” he said. “I have no idea what it would be.”